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Sunday, March 20, 2016

French insurance giant AXA (OTCQX:AXAHY)
has been doing what it said it would, but investors have been slow to
reward the company for its progress. The shares are down about 3% from my last update, which is better than the performance of peers like Generali (OTC:ARZGF), Aviva (NYSE:AV), and Zurich (OTCQX:ZURVY), and a little worse than Allianz (OTCQX:AZSEY), but investors shouldn't shoot for "no worse than the others" with their investments.

Management has done a good job of reducing expenses and boosting cash
flow, and the company's relatively solid Solvency II score is
encouraging for further capital distributions to shareholders. On the
other hand, high-growth markets like Turkey haven't delivered the
hoped-for growth, P&C premium growth has proven challenging, and
inflows to both the life and asset management businesses aren't as
strong as they need to be.

A key consideration, then, is whether AXA can take the steps
necessary to accelerate bottom line growth from the 2% to 3% rate seen
in 2015. Today's price is fair if the 10-year adjusted earnings growth
averages around 3%. A growth rate of 4% bumps the fair value to $26.50
and a little over 5% a year in adjusted earnings growth supports a
target close to $29.50. I believe 5% is attainable, but far from
certain, so this isn't a money-for-nothing sort of investment prospect.

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I started this blog as a way of archiving my writing for sites like Investopedia, as well as posting some thoughts on the markets, stocks, or whatever else strikes my fancy.
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